A Tale of Two Europes

The word “crisis” is usually employed to indicate that a person or even an entire culture has reached a turning-point which demands decisions: choices that either propel those in crisis towards renewed growth or condemn them to remorseless decline.

These dynamics of crisis are especially pertinent for much of contemporary Europe. The continent’s well-documented economic problems are now forcing governments to decide between confronting deep-seated problems in their economic culture, or propping up the entitlement economies that have become unaffordable (and morally-questionable) relics in today’s global economy.

While some European governments have begun implementing long-overdue changes in the form of austerity-measures, welfare-reforms, and labor-market liberalization, the resistance is loud and fierce, as anyone who has visited France lately will attest.

No-one should be surprised by this. Such reforms clash directly with widespread expectations about employment, welfare, and the state’s economic role that have become profoundly imbedded in many European societies over the past 100 years. Yet it’s also arguable this is simply the latest bout of an on-going clash of economic ideas which goes back much further in European history than most people realize.

Certainly the contemporary controversy partly concerns the government’s role during recessions. From this standpoint, Europe (and America) is rehashing the famous dispute between the economists Friedrich von Hayek and John Maynard Keynes in the 1930s about how to respond to the Great Depression. Should we, as Hayek maintained, react by giving markets the flexibility they need to self-correct? Or do we prime the pump à la Keynes?

At another level, however, the quarrel about Europe’s economic future is a reprisal of a far older discussion—one that predates modern economics’ founder, Adam Smith, by several centuries. It’s a debate about the place of the values of liberty and solidarity in economic life.

A major economic feature of medieval Europe was the presence of guilds in virtually every village and city. Mostly grouped around particular trades and professions, guilds sought to embody ideals of mutual assistance and brotherly love. These noble sentiments, however, often translated into guilds trying to predetermine who could engage in certain occupations or even produce particular goods and services (what we today would call “closed shops”). To enforce their claims, many guilds agitated for laws that restricted entry to their craft, stipulated maximum work-hours, and mandated an approximate equality of output and returns.

This state of affairs, however, did not go unchallenged. Many medieval bishops and lawyers, for example, insisted that all guild regulations were subordinate to the demands of natural justice. The fourteenth-century jurist Bartolus of Sassoferrato argued that guilds could not make “a law by which another is prejudiced, as for instance if they make a law that only certain persons and no others can exercise that craft.” There were also numerous instances of city governments limiting guild regulations and even disbanding guilds to protect consumers’ interests.

In short, the economic culture encouraged by European guilds ran counter to another way of thinking: one which, as the distinguished historian Antony Black observes, was present in Europe as early as the thirteenth century. This stressed “personal security in the sense of freedom from the arbitrary passions of others” and “of private property from arbitrary seizure.” It was understood, Black adds, that such freedoms could only be maintained if a credible legal process was successfully enforced. This facilitated the development of rule of law and growing disapproval of attempts to use the state to legally endorse monopolies or privilege any particular economic interest. This overall “complex of ideas,” as Black describes it, was underpinned by the Christian emphasis upon liberty and its implied limits upon state and group power.

In case all this sounds strangely familiar to our modern ears, it should. Many of the arguments that have intensified in Europe since the 2008 recession are basically secularized versions of this medieval clash.

Of course, the truth is that all human societies require both liberty and solidarity. Humans are individual and free by nature. But we are also social creatures who need others. The real question is how we realize both dimensions of human existence in the economy in ways that don’t generate political and institutional confrontations between the two.

One step forward would be for Europeans to disassociate notions of solidarity from state-interventionism and instead emphasize that concern for our neighbor should be primarily expressed through families and the non-state institutions of civil society. A second move would be to focus the government’s economic functions upon those which enhance economic liberty: i.e., protecting private property, ensuring stable money, upholding contracts, maintaining rule of law (rather than legally privileging particular economic groups), and performing those minimal welfare functions consistent with the principle of subsidiarity.

These guidelines may sound rather mundane. Yet even mild adherence to such prescriptions would upturn the unsustainable status quo prevailing throughout much of modern Europe, not to mention reconcile some age-old tensions in European political and economic culture.

For while important technical aspects of Europe’s current economic problems need attention, long-term transformation will only occur if Europeans are willing to rethink the state’s role vis-à-vis the values of liberty and solidarity and their institutional expressions in the economy. Without such change, much of Europe risks turning into an elegant retirement home for an aging population, or a grandiose museum of a civilization that was once the envy of the world.